INSURANCE LAW Atty.

Fernandez Case Digests 1 MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION,respondents. G.R. No. 124050. June 19, 1997 PUNO, J.: Facts: 1. In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. a. Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC1020, MSPC-1017 and MSPC-1022 2. Petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). a. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. b. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. 3. Petitioners filed a claim against private respondents for indemnity under the insurance contract a. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. b. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect. 4. Petitioners filed an action against private respondents to recover the sum of HK$299,345.30. 5. TC: ruled in favor of petitioners. a. It found that the damage to the goods is not due to manufacturing defects. b. It also noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against all causes of conceivable loss or damage.
Jerika Everly Marquez San Sebastian College of Law

6.

The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured. CA: Affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the "all risks" insurance policies issued by private respondents to petitioner Mayer a. However, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. b. It held that the action is barred under Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel.

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Issue: WON petitioners' cause of action had already prescribed on the mistaken application of the Carriage of Goods by Sea Act Held: No. 1. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. a. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. b. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. c. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code. The Filipino Merchants case is different from the case at bar. a. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. b. In the case at bar, it was the shipper which filed a claim against the insurer.

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The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. a. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. b. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured a. Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code

c.

Answer: No. If so give details ___________. Are you now, to the best of your knowledge, in good health? Answer: [ x ] Yes [ ] No 3. Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two hundred (P86,200.00) pesos. a. Leuterio died due to massive cerebral hemorrhage. b. Consequently, DBP submitted a death claim to Grepalife. c. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage on November 15, 1983. d. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint with the Regional Trial Court of Misamis Oriental, Branch 18, against Grepalife for Specific Performance with Damages. TC: in favor of respondent widow and against Grepalife a. CA sustained the trial courts decision.

4. 5.

2 GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF APPEALS AND MEDARDA V. LEUTERIO, respondents G.R. No. 113899. October 13, 1999 QUISUMBING, J.: Facts 1. A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP). a. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. 2. Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan a. In an application form, Dr. Leuterio answered questions concerning his health condition as follows: 7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
Jerika Everly Marquez San Sebastian College of Law

Issue: Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in the suit.

Held: 1. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness a. Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to the contract.

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In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the contract c. Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. Appellant insurance company had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim a. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. b. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer.[19] In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.[21] The mortgagor paid the premium according to the coverage of his insurance, which states that a. In the event of the debtors death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). a. Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage. The proceeds now rightly belong to Dr. Leuterios heirs represented by his widow, herein private respondent Medarda Leuterio

3 GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs. HONORABLE COURT OF APPEALS, respondents. G.R. No. L-31845 April 30, 1979 DE CASTRO, J.: Facts: 6. Private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endownment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting a. Mondragon finally type-wrote the data on the application form which was signed by private respondent Ngo Hing. b. Upon the payment of the insurance premuim, the binding deposit receipt (Exhibit E) was issued to private respondent Ngo Hing 7. Mondragon received a letter from Pacific Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such coverage 1957 Helen Go died of influenza with complication of bronchopneumonia. private respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu Issue: WON the binding deposit receipt (Exhibit E) constituted a temporary contract of the life insurance in question Held: No. The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a provisional or temporary

Jerika Everly Marquez San Sebastian College of Law

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insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself In the absence of a meeting of the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between thenl Accordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life. Private respondet, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably aware that said company does not offer the life insurance applied for. When he filed the insurance application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will approve the recommendation of Mondragon for the acceptance and approval of the application in question along with his proposal that the insurance company starts to offer the 20-year endowment insurance plan for children less than seven years
Jerika Everly Marquez San Sebastian College of Law

Ngo Hing must have known and followed the progress on the processing of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance application. the firm belief that private respondent had deliberately concealed the state of health and piysical condition of his daughter Helen Go. Wher private regpondeit supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguished. private respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the insurance compary. As an insurance agent of Pacific Life, he ought to know, as he surely must have known. his duty and responsibility to such a material fact The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight [Black's Law Dictionary, 2nd Edition], not for the alone but equally so for the insurer (Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70). Concealment is a neglect to communicate that which a partY knows aDd Ought to communicate 4 FORTUNATA LUCERO VIUDA DE SINDAYEN, plaintiff-appellant, vs. THE INSULAR LIFE ASSURANCE CO., LTD., defendant-appellee. G.R. No. 41702 September 4, 1935 BUTTE, J.: Facts: 1. Arturo Sindayen, up to the time of his death on January 19, 1933, was employed as a linotype operator in the Bureau of Printing at Manila and had been such for eleven years He and his wife went to Camiling, Tarlac, to spend the Christmas vacation with his aunt, Felicidad Estrada. The company accepted the risk and issued policy No. 47710 dated back to December 1, 1932, and mailed the same to its agent, Cristobal Mendoza, in Camiling, Tarlac, for delivery to the insured. Sindayen was at work in the Bureau of Printing. On January 12, he complained of a severe headache and remained at home. On January 15, he called a physician who found that he was suffering from acute nephritis and uremia. His illness did not yield to treatment and on January 19, 1933, he died.

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The policy which the company issued and mailed in Manila on January 11, 1933, was received by its agent in Camiling, Tarlac the agent, in accordance with his agreement with the insured, delivered the policy to Felicidad Estrada upon her payment of the balance of the first year's annual premium. The agent asked Felicidad Estrada if her nephew was in good health and she replied that she believed so because she had no information that he was sick and he thereupon delivered to her the policy. , the agent learned of the death of Arturo Sindayen and called on Felicidad Estrada and asked her to return the policy. But he did not return or offer to return the premium paid. Felicidad Estrada on his aforesaid statement gave him the policy. the company obtained from the beneficiary, the widow of Arturo Sindayen, her signature to a legal document entitled "ACCORD, SATISFACTION AND RELEASE" whereby in consideration of the sum of P40.06 paid to her by a check of the company, she "assigns, releases and forever discharges said Isular Life Assurance Co., Ltd., its successors and assigns, of all claims, obligation in or indebtedness which she, as such beneficiary ever had or now has The said check for P40.06 was never cashed but returned to the company and appears in the record of this case as Exhibit D . In its answer it pleads the "ACCORD, SATISFACTION AND RELEASE" (Exhibit A) signed by the widow of Arturo Sindayen, the plaintiff-appellant that the said policy never took effect because of paragraph 3 of the application above quoted, for at the time of its delivery by the agent as aforesaid the insured was not in good health. A number of these cases go to the of holding that the delivery of the policy by the agent to the insured consummates the contract even though the agent knew that the insured was not in good health at the time, the theory being that his knowledge is the company's knowledge and his delivery of the policy is the company's delivery; that when the delivery is made notwithstanding this knowledge of the defect, the company is deemed to have waived the defect Mendoza was authorized by the company to make the delivery of the policy when he received the payment of the first premium and he was satisfied that the insured was in good health.
Jerika Everly Marquez San Sebastian College of Law

Mendoza had the authority, given him by the company, to withhold the delivery of the policy to the insured "until the first premium has been paid and the policy has been delivered to and accepted by me (the insured) while I am in good health he made a written application on December 26, 1932, to the defendant Insular Life Assurance Co., Ltd., through its agent, Cristobal Mendoza, for a policy of insurance on his life in the sum of P1,000 and he paid to the agent P15 cash as part of the first premium the delivery of the policy to the insured by an agent of the company who is authorized to make delivery or without delivery is the final act which binds the company (and the insured as well) in the absence of fraud or other legal ground for rescission. The fact that the agent to whom it has entrusted this duty (and corporation can only act through agents) is derelict or negligent or even dishonest in the performance of the duty which has been entrusted to him would create a liability of the agent to the company but does not resolve the company's obligation based upon the authorized acts of the agent toward a third party who was not in collusion with the agent. 5 PACIFIC TIMBER EXPORT CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY, INC., respondents. G.R. No. L-38613 February 25, 1982 DE CASTRO, ** J.: Facts: 1. The plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. defendant issued on said date Cover Note No. 1010, insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY, INC. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner The regular marine cargo policies were issued by the defendant in favor of the plaintiff Policy No. 53 H0 1033 (Exhibit B) was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board feet

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some of the logs intended to be exported were lost during loading operations in the Diapitan Bay while the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident. the plaintiff informed the defendant about the loss of 'appropriately 32 pieces of log's during loading of the 'SS Woodlock' The plaintiff subsequently submitted a 'Claim Statement demanding payment of the loss under Policies Nos. 53 HO 1032 and 53 HO 1033, in the total amount of P19,286.79 the adjuster found that 'the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 inasmuch as said policies covered the actual number of logs loaded on board the 'SS Woodlock' loss of 30 pieces of logs is within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00. the adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the shipment the defendant wrote the plaintiff denying the latter's claim, on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marines policies No. 53 110 1032 and 713 HO 1033 were received in good order at their point of destination Petitioner contends that the Cover Note was issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies We uphold petitioner's submission that the Cover Note was not without consideration for which the respondent court held the Cover Note as null and void, and denied recovery therefrom. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner's contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums
Jerika Everly Marquez San Sebastian College of Law

If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer From April 1963 to July, 1963, enough time was available for private respondent to determine if petitioner was guilty of delay in communicating the loss to respondent company. In the proceedings that took place later in the Office of the Insurance Commissioner, private respondent should then have raised this ground of delay to avoid liability. It did not do so. It must be because it did not find any delay, as this Court fails to find a real and substantial sign thereof

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